Telecoms.com

a week in wireless

Year of the water snake

At midnight tonight the world’s biggest party will kick off, as more than one billion Chinese people take to the streets to celebrate the Chinese New Year. 2013 is the year of the water snake which is a totem that symbolises wisdom. It’s also the year that Telecoms.com will be relaying the industry’s wisdom in its first annual industry survey.

What was striking about the results is just how much the responses from operator personnel (600 individuals from 260 separate opcos) matched those of their peers across the wider industry (almost 2,000 respondents, all told), even when looking at contentious issues like roaming and regulation. Does this mean the industry has aligned in the face of threat from external players? After all, the snake is an adaptable creature renowned for its ability to sneak into other environments. Or does it mean that operators are taking their lead from the vendor community in these cautious times? And does that even make sense? It’s not like the vendor sector is the most stable of environments at the moment.

A strong sign of that shake up in the vendor space was seen this week when telco session delivery specialist AcmePacket said it had agreed to be acquired by US software giant Oracle.

It’s long been recognised that the networking and IP specialists that dominated the IT world, would have scope to win telco customers as networks shift to all-IP. Indeed, Telecoms.com found that more than two-thirds of telecoms professionals (67.5 per cent) believe that the move to LTE will change the relative standings of equipment suppliers.

Oracle’s move this week sends the company deeper into telco territory and the software firm, like industry peer Cisco, is in a favourable position due to deep pockets. At the end of last year, Cisco made clear its intention to acquire long-time partner Broadhop – a telecom specialist in the policy and charging areas.

There is even a suggestion that Cisco is looking to integrate itself more deeply within the telecoms vertical by shedding its old skin, just like the snake. Just over a week ago the firm sold its home networking and wifi operation Linksys to Belkin and if the Broadhop acquisition goes ahead successfully, a logical next step for a company with Cisco’s pedigree would be to acquire a network infrastructure business, were one to be on the market at the right price.

UK disruptor Virgin Media is one company on the market at the right price and right now is in negotiations with international cable operator Liberty Global to sell out for approximately $23.3bn. Virgin Media operates a nationwide cable, fibre and ADSL network competing with incumbent BT in the consumer space, an enterprise focused business solutions arm, and a highly successful MVNO.

Liberty has internet operations in 11 countries in Europe and TV assets in the US and Australia and if this deal goes ahead it could be the largest shake-up in the UK telecoms and media sector since the merger of T-Mobile and Orange UK in 2010.

The UK is one of those markets where the local carriers are struggling right now, with levels of competition at an all time high. Operator group Vodafone this week announced a two per cent year on year drop in revenue for the final quarter of 2012 on the back of revenues drops in the UK as well as Germany, Italy and Spain.

Giving the likes of Vodafone and rivals EE something to think about is the UK arm of Hutchison’s 3, which, ever the disruptor, has announced that it will not price LTE services at a premium to its existing offers. 3UK is currently bidding for spectrum in the UK LTE auction and said in a statement on Monday that the technology will be added to its network later this year but will not be any more expensive than the firm’s current offering.

EE stole a march on the rest of the UK mobile operator community by launching LTE in refarmed 1800MHz spectrum towards the end of 2012 but priced LTE higher than its 3G/HSPA services. The firm did cut its prices in January however, leading some people to conclude that uptake had been disappointing. That first-mover advantage is shortly to expire of course, so EE is clearly trying to attract as many users onto long contracts as possible.

“If the price of a service is well above a consumer’s income or disposable spending levels then they are simply not going to buy it,” said Jaco Fourie, senior BSS expert at Ericsson, when the Informer spoke to him this week. “If you have more than 100 per cent penetration in a market then you might get a bump from the early adopters when you first launch [a new technology] but when you get to the mass market you will grow at GDP—end of story.”

Chinese vendor Huawei would have been buying in ridiculous amounts of fireworks this week, not just to celebrate the New Year, but also to celebrate the fact that it has been tapped by Microsoft for a project that prices smartphones within the means of low-GDP communities.

Microsoft has pledged to invest around $74m in Africa over the next three years, introducing tens of millions of smart devices into the hands of the local youth and bringing over a million small and medium sized enterprises online.

A key element of the Microsoft 4Afrika Initiative is to increase the adoption of smart devices, with Huawei introducing a full-functionality Windows Phone 8 device at a sub-$150 price tag. The device will be preloaded with select applications designed for local users initially in Angola, Egypt, Ivory Coast, Kenya, Morocco, Nigeria and South Africa from this month.

The Informer had a chat with Vasel Aral, CEO of Kazakhstani operator KCell this week, who predicted that the Chinese vendors will come into the picture this year, or very soon after, with sub$100 smartphones, that will change the course of data adoption. “The Chinese have a good model, with devices comparable to the iPhone 3GS at about $120 already,” he said. “Once we hit sub-$100 that will change the game.”

Interestingly, there was limited sympathy from survey respondents over the suggested plight of Chinese vendors in the infrastructure space; with just 28.2 per cent agreeing that Huawei and ZTE are being unfairly restricted outside of their domestic market on security grounds, while 40.8 per cent disagreed that they are. The remaining 31 per cent of respondents had no opinion on the matter.

Huawei is certainly a shoe-in in Germany however, along with Acme Packet/Oracle, Ericsson, NSN, Qualcomm and Sony Mobile, where Spanish operator group Telefónica has been successfully demonstrating voice call continuity when handing over from LTE to 3G. The handover was achieved by Telefónica Deutschland, in a test lab environment.

While there has been recent progress with VoLTE technology in South Korea and the US, LTE networks are still not able to handover a VoLTE voice call to 2G or 3G. Most networks fall back to legacy 2G/3G networks whenever they make or receive a voice call. But Telefónica’s engineers in Germany have now demonstrated the SRVCC standard (Single Radio Voice Call Continuity) successfully allows for the handover of a VoLTE call from the LTE network to 3G.

The Informer supposes the networks have to have something to offer in response to all the free OTT stuff out there. Around 38 per cent of respondents to the industry survey believe that operators have already been defeated in the battle for brand loyalty by the OTT guys, and analysts are even optimistic about the potential for ‘free’ services to turn a profit.

Apparently, Facebook is well on-track to generate revenues of over $1bn from mobile advertising this year, capturing almost ten per cent of the market. According to Informa, the global mobile advertising market is forecast to generate revenues of $12.8bn in 2013 and the contribution of mobile advertising in Facebook’s total ad revenues grew from 14 per cent in Q312 to 23 per cent in Q412. During this period, Facebook made mobile advertising revenues of around $457.9m.

So provided Facebook can continue to get at least 20 per cent of its total ad revenues from mobile, it should be able to easily make over $1bn from mobile advertising in 2013.

One comment

“If you have more than 100 per cent penetration in a market then you might get a bump from the early adopters when you first launch [a new technology] but when you get to the mass market you will grow at GDP—end of story.”

What like Apple when it entered the saturated mass mobile phone market as an upstart?

Operators can create new markets or increase share of wallet. This can be helped by LTE as new applications, both consumer and enterprise, are found for the additional bandwidth. It doesn’t have to be limited by GDP.

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